• Poll: Economic Optimism Surges
  • US Oil Comes to Europe
  • Ze Sees Chornobyl as ‘Tourist Magnet’
  • Zaporizhia: SE Ukraine’s Airport for the 2020s
  • Controls End on Dividend Repatriations
  • Dragon Ups 2019 GDP Growth Forecast
  • Exports Jump for Iron, Eggs, and Chickens
  • Ze Sees Chornobyl as Econ Growth Hot Spot
  • Georgia Seeks EU Tourists After Russia’s Flight Ban
  • Customs Shakeup Begins
  • Norway’s Scatec Solar Invests €350 million in Ukraine
  • Supreme Court Unblocks ‘Big’ Privatizations
  • Airports Record Double-Digit Passenger Growth
  • Estonia’s Bolt Opens R&D Unit in Kyiv Next Month
  • Kyiv Starts to Ticket Parking Violators
  • EU Aids Azov
  • Anti-Corruption Court Starts Sept. 5
  • Naftogaz Starts Eurobond Show
  • Regus Turns Maidan Trade Union Building into Startup Hub
  • Foreign Medical Tourism Growing
  • Naftogaz Ready to Sell Eurobonds This Week
  • As Foreigners Buy Ukraine Treasuries, Hryvnia up 6.5% Against the Dollar
  • First Ever US Oil Arrives at Odesa
  • Nefyodov Promises E-Customs in One Year

Volodomyr Zelenskiy’s election as President contributed to a dramatic upswing economic optimism, the International Republican Institute says, citing their new June 13-23 nationwide poll. Of the 2,400 respondents, 48% predicted that Ukraine’s economy will improve over the next year – more than triple the 14% who felt that way in September. Similarly, between the two polls, Ukrainians pessimistic about the future dropped almost in half – from 71% to 39%.

Ten days before parliamentary elections, President Zeleskiy watched in his office Thursday as Andriy Favorov, head of gas sales for Naftogaz, signed a decree lowering household gas prices by 10.4%. Cutting prices is possible because Europe’s natural gas import price has dropped by 60% since its four years high last September. Andriy Gerus, the president’s representative to the Cabinet of Ministers, estimates Ukraine’s total price reduction from May to July is 21%. Lower gas prices help the government in its fight to bring inflation down to 8% at the end of this year.

The two tanker loads of North Dakota oil docking in Odesa this month are part of a much larger push by the US to sell oil to Europe, Reuters reports in a story headlined: “U.S. oil makes it to Ukraine in another blow to Moscow.”  Following the 80,000 tons of US oil unloaded in Odesa last weekend, another similarly sized shipment is expected in Odesa July 24. More US deliveries to Ukraine are ‘likely’ in August, Reuters reports from London and Moscow. Partly in reaction to the disruption caused by contaminated oil from Russia, Reuters says, “U.S. supplies to Europe have risen steadily since May and have remained above 2.5 million tons a month.”

A tender is to be posted for dismantling unstable parts of the Soviet-era shelter over the damaged nuclear reactor at Chornobyl. A new €1.5 billion ‘New Safe Confinement’ structure covers the old shelter. Dismantling should take place in the early 2020s, Sergey Kondratenko, the deputy chief engineer of the new confinement facility, tells Ukrinform.

Building on the global success of HBO’s “Chernobyl” series, President Zelenskiy signed a decree to turn the disaster site two hours north of Kyiv into a “tourism magnet.” Ticketing will be electronic, new checkpoints will be opened, restrictions on filming will be dropped, new walking paths and river tours will be inaugurated, and cell phone service will be expanded into the largely uninhabited Exclusion Zone. “Until now, Chernobyl was a negative part of Ukraine’s brand – it’s time to change it,” Zelenskiy said on a site visit Wednesday. “We have to show this place to the world: scientists, ecologists, historians, tourists.”

Investing $45 million in a new terminal and a recovered runway, Zaporizhia airport is on track to become southeast Ukraine’s leading airport for the 2020s. On Oct. 20, city officials are to inaugurate the new cement runway and the new steel and glass terminal, capable of handling 400 passengers an hour. Already, traffic is up by one third for the first half of the year, to 230,000 passengers. This year, SkyUp started summer flights from Zaporizhia to Barcelona, Egypt, Montenegro, and Turkey. Depending on passenger numbers, SkyUp may base jets in Zaporizhia next year.

By contrast, traffic at rival Dnipro airport is up by only 9%, to 149,000 passengers for the first half of 2019. Located 85 km north of Zaporizhia, Dnipro has nearly 1 million inhabitants, 30% more than Zaporizhia. Five years ago, Dnipro was Ukraine’s fifth busiest airport, with six times the passengers of Zaporizihia. But, under the control of Igor Kolomoisky, Dnipro has been starved of investment, missing out on Ukraine’s discount airline revolution and recording the lowest growth of Ukraine’s top 10 airports.

The central bank canceled limits on repatriating dividends yesterday, erasing a cap of €12 million per month. The National Bank of Ukraine may have timed the liberalization to break the hryvnia’s rise against the dollar, a 6% increase this year. But during the first half of this year, companies only repatriated $1.27 billion in dividends, 4% of total bank customer demand for foreign currency.

Dragon writes: By canceling the monthly dividend repatriation limit, the NBU lifted one of the barriers that kept new foreign investors from entering Ukraine…The NBU seems determined to remove all existing restrictions and transition to the free movement of capital.”

Dragon Capital has upgraded its GNP growth forecast for this year to 3.2% y-o-y, nearly matching last year’s growth rate of 3.3%. Previously, Dragon and the State Statistics Service forecast 2019 growth at 2.5%. Dragon cited favorable commodity prices. Over the last year, Europe’s natural gas price has almost dropped in half. Iron, a major export, has nearly doubled in price. With food exports at record levels and foreign purchases of Ukrainian bonds pushing down debt service costs, Dragon raised by 7.4% its year-end exchange rate forecast – to 27.5 hryvnia to the dollar.

With inflation falling to 9% in June, Ukraine fell out of the group of 20 countries with the highest inflation, reports the National Bank of Ukraine. Ukraine now shares 22nd place with Eritrea and São Tomé and Príncipe. In Europe, Ukraine is still the leader. Tomas Fiala, Dragon Capital CEO, said Wednesday: “We also expect inflation to fall below 8%.”

Riding the near doubling of iron ore prices this year, Ukraine increased iron export earnings by 24.5%, to $1.7 billion. Over the same January-June period, exports by volume rose 9%, to almost 20 million tons. In May, iron ore exports jumped 29% over April levels. Top markets were: China – 25%; Poland – 14%; and the Czech Republic – 11%. Due to a mining disaster in Brazil in January, Chinese iron prices for September delivery recently topped $130 a ton, a six-year high.

Despite the iron boom, exports of all ferrous metals contracted by 11% during the first half of the year, to $4.8 billion. During the first half of this year, ferrous metals accounted for almost 20% of Ukraine’s total exports, down from 23% in the first six half of 2018, reports the State Fiscal Service.

Egg exports are up 69% y-o-y for the first half of this year. Ukraine exported 75,400 tons of eggs in the shell, reports the Fiscal Service. A fast-growing business, egg exports grew last year by 25%.

Poultry exports are up 38% y-o-y for the first half, to 211,200 tons. In monetary terms, exports rose 27.5%, to $307 million. Top markets are: Saudi Arabia – $76 million dollars; the Netherlands – $53 million; and Slovakia – $33 million.

Erratic weather may cut this year’s fruit and berry harvest by 25%, says Dmytro Kroshka, chairman of Ukraine’s Agrarian Export. “Growers complain of the rainy spring, dry summer, and hail due to rapid temperature changes,” he told reporters. The harvest of stone fruits, like cherries, is to fall by 15%, to 38,000 tons. Production of apples, a major export last year, may fall 30%. On the other hand, blueberry and walnut harvests may grow by 30% this year.

After shipowners repeatedly complained of shakedowns for bribes by state Environmental Inspectors, Prime Minister Groysman suspended Wednesday all testing of ship ballast water and asked Wednesday for a National Police investigation. Groysman ended inspections in April, but shakedowns continued. With business chambers estimating the corruption takes a $200 million toll on the economy, the Cabinet of Ministers is to consider next week a system that protects the waters of Ukraine’s Black Sea ports and protects shipowners from bribe demands. Maxim Nefyodov, the new Customs head, writes on Facebook that port delays can cost a shipping company “tens of thousands of dollars” a day, prompting some to reroute to Constanta, Romania, or Varna, Bulgaria.

Oleksandr Vlasov, State Fiscal Service commissioner, fired on Tuesday the heads of the four customs offices bordering the EU – Volyn, Lviv, Zakarpattia and Chernivtsi. At the same time, President Zelenskiy ordered measures to modernize customs and to cut corruption. One step would synchronize data bases with neighboring countries. Maxim Nefyodov, the new head of the Customs Service, cites a typical case: Eurostat shows imports of €160 million in shoes from Ukraine in 2018. Ukraine’s Customs Service reports exports of  €40 million

Norway’s Scatec Solar closed financing Monday on a €54 million, 54 MW solar station in Kyiv region, nearing Scatec’s goal of investing €350 million in Ukraine this year. The new project, located in Bohuslav, two hours south of Kyiv, is funded partially by FMO, the Dutch development bank, and GIEK, Norway’s Export Credit Guarantee Agency. With Bohuslav, Scatec has five projects under construction in Ukraine. The 336 MW total represents one-third of Scatec’s solar plant construction worldwide this year.

The EBRD recently signed a €19.7 million loan to partially fund another Scatec solar project – a €56 million, 55.4 MW plant in Chyhyryn, a village 65 km south of Cherkasy city. Funding also comes from Swedbank International’s Swedish Fund and the Northern Ecological Finance Corporation, or NEFCO. The EBRD funds two other Scatec solar projects totaling 77 MW – one also in Cherkasy and another in Mykolaiv.

Cutting solar energy tariffs by 25% on Jan.1 will render many new solar projects “financially unviable,” Magnus Johansen, Ukraine business development manager for Scatec Ukrainewarns in an interview with Interfax-Ukraine. In Ukraine, solar developers often have to pay to build connections with the national grid. He tells the UBN that in southern Ukraine, where solar irradiation is the highest, the grid is increasingly saturated, forcing developers to migrate north to sites in central Ukraine. He predicts: “With the implementation of the proposed auction scheme (with the mentioned tariff differences), you will likely see a larger shift of international investors into wind (vs solar) projects.”


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Dniprovska, a major poultry producer, signed a €20 million loan with EBRD Monday to expand and upgrade its chicken slaughterhouses to win certification to enter the EU market. With 7% of Ukraine’s chicken market, the Zaporizhia-based company exports to the Middle East, Asia, Africa, and Oceania.

Ukraine’s wheat harvest is to rise by 13% this year, to 28.2 million tons, according to a Reuters poll. Exports should rise by 18%, to 19.1 million tons. Russia’s wheat harvest should increase by 9% to 78.5 million tons. Russia’s exports should rise by 2%, to 36.6 million tons. In Kazakhstan, Central Asia’s largest grain producer, the wheat harvest is expected to drop by 2%, 13.7 million tons. Exports should drop by 12%, to 7.5 million tons. As of Monday, Ukrainian farmers threshed 7.3 million tons of winter wheat, one third of the forecast.

Preparing for a repeat of last year’s grain exports of 50 million tons, Ukrzaliznytsia says that, for the first time since 2013, the railroad has a reserve of freight cars and locomotives. Yevhen Kravtsov, CEO of UZ, says it has 130 locomotives and “several thousand freight cars” in reserve.

Freight wagons move through the national rail network at 80 km a day – 40% of international norms, reports Our Car,’ a freight wagon monitoring project of the Center for Transportation Strategies. “The main causes of delays for all types of cars are the same: the lack of locomotives and waiting to form freight trains,” reports the Center, an independent transportation consultancy.

‘Big’ privatizations can start, following a ruling by a Supreme Court unit which upheld the process of appointing privatization advisers for five state-owned companies. Almost one year ago, one legal challenge to the State Property Fund ended up freezing the entire process last December. In what looks like the Court following the election returns, the Supreme Court decision was published June 26 — six days after President Zelenskiy publicly promised business leaders an aggressive program to privatize large state companies.

It is legal for labor contracts in Ukraine to stipulate salaries in dollars or euros, the Supreme Court of Ukraine rules. While salaries can be fixed in foreign currencies, payment must be made in hryvnia. In May, the average monthly salary was UAH 10,239, currently $400. This is double the level of 2015.

Enjoying strong demand for hryvnia bonds at the weekly auction on Tuesday, Finance Ministry pushed down all yields on its short term bonds, by 20 to 34 basis points. The new cutoff rates for the treasuries were: 17.24% for three months; 17.6% for seven months; 18% for 12-months; and 16.75% for three years. The cutoff rate for 5 ½ year bonds, a category the Ministry is pushing, stayed the same, at 15.85%. Overall, investors bought bonds worth UAH 6 billion UAH, the equivalent of $235 million, one quarter less than the UAH 8 billion sold last week.

Ukraine’s air travel boom continues with five of the biggest airports recording double-digit passenger growth during the first half of the year, compared to the same period last year. Growth champions are: Lviv +46% to 950,000 passengers; Zaporizhia +33.5% to 230,000; Kharkiv +26% to 553,000; Kyiv Boryspil + 20% to 6.7 million; and Kyiv Sikorsky +16% to 1.3 million. As usual, Odesa, the nation’s fourth busiest airport, lags on all fronts – opening its passenger terminal, completing its new runway, and counting its passengers.

Bolt, the global taxi service, plans to open an R&D center in Kyiv UNIT.City next month. Operating in 30 countries and 50 cities, the Estonia-based digital taxi company, qualified last year as a ‘unicorn’ – a startup valued at $1 billion. Known until March as Taxify, the company operates in Kyiv, Kharkiv, Lviv and Odesa. Taras Potichny, the regional manager, predicts the new Kyiv office will “give impetus to the launch of new projects, new promising partnerships, new initiatives.”

On Monday, Kyiv parking inspectors started issuing the city’s first parking tickets. An inspector photographs the violation and the offending car’s license plate. Images and information are sent to the central parking office. A ticket is sent back to the inspector, who prints it on the spot. On Monday, “inspectors wrote out fines to hundreds of violators,” reports TSN. Fines range from the hyrvnia equivalent of $10-20. By the end of this year, towing is to start.

Dovetailing with President Zelenskiy’s plan to rebuild the government-controlled half of the Donbas, the EU provided €119 million in new aid to Ukraine on Monday. It is largely focused on the nation’s war-affected southeast and Azov seaports. Much of the concrete assistance will be funneled through the European Investment Bank or EIB:

€5 million for demining
€11 million to promote small and medium enterprises
€20 million to rebuild trolley services in Mariupol, Melitopol, and Berdyansk
€27.7 million for humanitarian and educational aid
€45 million to rebuild Mariupol’s sewage and lighting systems

To reduce the geographical isolation of the Sea of Azov, the EU is funding feasibility studies that could unlock €470 billion in loans from the EIB and other sources to upgrade the railroad line between Zaporizhia and Mariupol and to upgrade the 420 km east-west road between Mariupol and Kherson. Johannes Hahn, the EU’s Commissioner for eastern Neighborhood Policy, said: “The additional support to the Sea of Azov region is a strong sign of EU solidarity aimed at both alleviating the humanitarian situation and promoting economic opportunities for the people living in the region.”

Separately, the US government is reviewing engineering bids to build piers, dry docks, and warehouses at the two main Azov ports – Berdyansk and Mariupol. Last week, the Azimut company started dredging Mariupol port’s approach channel and berth area. In the first dredging in a decade, 2 million cubic meters of silt are to be removed by the end of this year.

From Reni on the Danube to Mariupol on the Azov, Ukraine’s Sea Ports Authority is preparing to lease to private businesses 180 real estate properties in 12 ports. Aiming for transparent procedures through ProZorro, the Authority is dividing the properties into two groups: berths, warehouses and loading complexes used to operate the ports; and ancillary properties – empty buildings or vacant lots – that can be put to productive use. Details will be on the Ports Authority website.

The EU also reaffirmed on Monday its willingness to disburse the second tranche of €500 million in macro-financial aid – pending Ukraine meeting a checklist of reforms. Last April, Finance Minister Oksana Markarova said that half of the reforms have been accomplished. This summer, three more are underway: a competitive electricity market, an independent, modernized customs service, and a High Anti-Corruption Court.

Ukraine’s new High Anti-Corruption Court starts work Sept. 5, President Zelenskiy told visiting EU leaders Monday. “The court will begin considering cases of top corruption, in a building, by the way, on Peremoha Avenue,” he referring to Kyiv’s ‘Victory Avenue.’ “That is very symbolic because we are not just interested in fighting against corruption, but in the victory over it.” On May 7, the judges elected Olena Tanasevych as head of the Court.

Naftogaz starts meeting today with investors in London and Frankfurt, preparing to place 5-year euro-denominated Eurobonds, reports Interfax-Ukraine. Bookrunners are Citibank and Deutsche Bank. “Naftogaz of Ukraine expects early cabinet resolution to enter the Eurobond market,” Interfax, referring to Cabinet of Minister’s authorization needed to place the bonds.

Aggressively pumping natural gas into Ukraine’s underground storage facilities, Naftogaz reached the 45% mark on Saturday, with 14 billion cubic meters in storage. Naftogaz CEO Andriy Kobolyev says the company needs to borrow money to top off the tanks – 20 bcm total. At that level, Ukraine will have enough gas for next winter and will approach the September gas transit talks with Gazprom from a stronger bargaining hand. Last year, Ukraine consumed 32.3 bcm of gas, of which 10.6 bcm was imported.

Britain’s IWG plc, formerly Regus, will open next month the first phase of a nine-floor, 600-workplace, 6,100-square meter office center in Maidan Plaza, the landmark central Kyiv building originally known as the Trade Unions Building. Operating under IWG’s Spaces Brand, the center will offer networking events, courses and business lectures. “Spaces is a place that is designed to unite entrepreneurs and provide ideal conditions for creating new ideas, launching startups and developing a successful business,” says Yulia Litvinenko, Spaces Ukraine director. Operating as Regus in Kyiv since 1998, IWG has eight business centers – seven on the right bank, and one, Silver Breeze, on the left bank.

With the average vacancy rate in Lviv’s shopping centers at 2.9%, four new shopping centers are to open over the next 18 months, Oksana Gavrilevich, the analyst for OTG commercial real estate brokers, tells Interfax-Ukraine.  The new centers will add 34,600 square meters of gross leasable space, expanding the city’s total retail area by 9%. The two biggest centers are Arsen, at 60 Chervona Ave., with a leasable area of 24,800 square meters; and Kinescope, on UPA Heroes Street, with a leasable area of 8,600 square meters.

Medical tourism to Ukraine is increasing, with 120 clinics receiving foreign patients and the average bill hitting $2,500, Violetta Yanyshevska, head of the Ukrainian Association of Medical Tourism, told an industry round table last week, reports Interfax-Ukraine. Top areas are reproductive treatments, plastic surgery, dentistry, sanatorium treatments, physical rehabilitation, treatment of eye diseases, heart surgery and cell therapy.

For the first time since 2014, Ukraine’s net foreign exchange reserves have topped $10 billion. Alfa-Bank reports: “Net FX reserves (gross reserves excluding debt to the IMF) surpassed USD 10 bln for the first time since 2014, with their end-June amount estimated at USD 10.6 bln.“

With Ukraine’s GDP expected to hit $150 billion this year, the nation is on track to record 60% cumulative GDP growth since 2016, when it was $93.4 billion. Over the last four years, the hryvnia dollar exchange rate has varied little, staying largely within a 25-26 band. In 2013, Ukraine’s GDP peaked in dollar terms at $183 billion. But, from 2009 to 2013, the exchange was fixed at 8 hryvnia to the dollar, an artificially high rate.

With iron ore prices almost doubling this year, it is more profitable to sell iron pellets than to make steel, writes Oleksiy Blinov, research head for Alfa-Bank Ukraine. Ukraine’s average daily steel output in June was down 8% over May, to 54,200 tons. Referring to Ukraine’s mine-to-blast furnace companies, he writes: “This motivates vertically integrated companies to sell a raw product, instead of loading steelworks.”

An “electronic customs” designed to minimize opportunities for corruption can be launched by next summer, says Maxim Nefyodov, the new head of the State Customs Service. In his previous post, as deputy minister of Economic Development and Trade, Nefyodov implemented the ProZorro electronic procurement system and for privatization auctions. Today, Ukraine has enough funding from Western nations and enough Ukrainian IT experts to set up ‘e-customs’ within a year, Nefyodov said in Lviv Friday, hours after the Cabinet of Ministers confirmed him in the job.

Nefyodov’s five priorities for customs are: making data electronic, changing personnel, improving customs equipment, integrating into the European customs union, and drafting a customs legal code. Customs officials will be hired on short- and mid-term contracts that will be renewed based on performance, he says in a lengthy interview with Ekonomichna Pravda.

Concorde Capital’s Zenon Zawada writes: We are confident that Nefyodov is serious about reforming customs and has both the will and the skill to do so. Nefyodov will have accomplished a revolution in Ukraine’s notoriously corrupt and ineffective customs service even if he accomplishes just a third of his proposals.”


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